JiaXing Gas Group's (HKG:9908) Dividend Will Be Reduced To CN¥0.1644

JiaXing Gas Group Co., Ltd. (HKG:9908) has announced that on 10th of October, it will be paying a dividend ofCN¥0.1644, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 6.1%.

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JiaXing Gas Group's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, JiaXing Gas Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 10.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for JiaXing Gas Group

JiaXing Gas Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was CN¥0.25 in 2021, and the most recent fiscal year payment was CN¥0.445. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

JiaXing Gas Group Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. JiaXing Gas Group has impressed us by growing EPS at 10.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for JiaXing Gas Group's prospects of growing its dividend payments in the future.

JiaXing Gas Group Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that JiaXing Gas Group has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for JiaXing Gas Group that investors need to be conscious of moving forward. Is JiaXing Gas Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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